The finance ministry is likely to raise the exemption limit for service tax from Rs 400,000 to Rs 10 lakh (Rs 1 million) in the forthcoming Budget.
This will benefit a large number of individuals who provide taxable services like beauty enhancement at parlours.
There has been a demand from experts to raise the limit in order to lower the cost of collecting the tax.
"Going by the 80:20 principle, where 80 per cent of revenues come from 20 per cent of tax-payers, such a move would lower the cost of administration and reduce the number of assessees by 40-50 per cent from the current 10 lakh," Ashok Dhingra, head of indirect taxation at Khaitan & Co, said.
PricewaterhouseCoopers Executive Director S Madhavan expected the limit to be hiked from Rs 400,000 to Rs 10 lakh in this year's Budget.
The other benefit of such a move would be less tax avoidance. Experts said the current limit encouraged people to misreport taxable income and resort to dealings in cash.